A new law intended to improve Oklahoma's method of collecting delinquent sales taxes from businesses is drawing criticism as being unfair to small business owners.
Michael Delaney, whose wife owns a pet boarding and day care in Norman, said he's disappointed in the GOP-controlled Legislature and Republican governor who claim to support small businesses but approved the measure that was passed earlier this year.
“Every other word out of their mouth is we are here for small business,” he said.
“That's what sends a chill down my spine — when I see stuff like this. … There are people who are always going to be evading taxes, but now they are bringing it down to a granular level of enforcement that is uncalled for and as far as I'm concerned un-American.”
Paula Ross, a spokeswoman with the Oklahoma Tax Commission, said the measure, Senate Bill 1984, is not intended to harm businesses in the state. The measure is expected to collect about $16.7 million in delinquent sales taxes from businesses this fiscal year, which began July 1. That money is sales tax already being paid by customers, but not being turned into the state by businesses.
“It's an additional enforcement tool,” she said. “Our goal is to keep businesses and all taxpayers in compliance with the state tax laws. All enforcement efforts are just an ongoing thing that we do to keep businesses in compliance so the state can collect taxes so the citizens can have services.”
Before the new law, the Tax Commission had the power to shut down businesses — and did — for failing to pay delinquent sales taxes, Ross said.
The new law gives the agency specific guidelines when closure procedures may begin.
For the most part businesses pay sales taxes monthly.
State law allows for semiannual filing when the tax does not exceed $50 a month.
Customers pay the sales tax when they make a purchase, and the business is to remit the tax to the state.
“That tax isn't something the business should ever keep,” Ross said. “That is always supposed to be remitted back to the state so it can go to local governments or back to the state.”
The law, which was passed and signed into law earlier this year, took effect Nov. 1.
It gives the Tax Commission the authority to shut down businesses out of compliance with paying state sales taxes.
A business is considered noncompliant if for three months during any 24-month period they fail to either report or remit sales taxes.
“That I find a very disturbing, very overreaching, very controlling legislation to pass,” Delaney said.
“I have serious concerns and questions about where our government is going with regards to control over small businesses, why they need such control and why wouldn't it behoove the government to always allow a business to keep its doors open, keep its people employed, and take what existing rules and regulations that are on the books for collecting back taxes.”
Delaney said his wife's business, Fur Night and Day LLC, has paid its taxes on time in the two years it has been in business.
About the law
Businesses that are late remitting state sales taxes will now be notified of possible closure action if they are delinquent for two months within a two-year period, according to the law.
If a business is delinquent for the third month, the Tax Commission issues a closure notice.
If the business doesn't pay all the delinquent tax, entering into an approved payment plan or ask for an administrative hearing, the Tax Commission issues a closure order.
If a hearing is requested, the Tax Commission is to hold the hearing within two weeks of the request. However, the only valid defense is proof of paying the tax or submitting a valid payment plan.
If a closure order is issued, a notice would be posted at the business.
The new law is intended to make sure businesses that are delinquent in remitting the sales tax don't get too far behind, she said.
“Most businesses for the most part want to pay taxes,” Ross said.
“At times they use that to run their business, but that is not the intent of sales tax money. For businesses that pay timely, which the majority do, this levels the playing field because you don't want to be competing with a business that's using their sales tax money and you're paying yours.”
Ross said the Tax Commission will continue to work with businesses that fall behind in remitting their sales tax.
“There are times when people have had illnesses in their business,” she said. “We take circumstances into account, but this gives us a guideline that if somebody just traditionally doesn't pay their taxes timely. … We don't really ever want to shut a business down.”
The Tax Commission will develop a payment plan for delinquent businesses so they can pay their back taxes and remain operating, Ross said.
Delaney said he doubts the state would close down big retailers for being late with remitting sales taxes.
Ross said the Tax Commission applies its regulations evenly.
Big retailers usually have systems in place to make sure sales taxes are remitted to the state promptly.
“It will be fair from the smallest business up to the largest business,” she said.
“What we will try to do is just get the state tax dollars that citizens pay — it's their money. They pay it. It's never the business'.”